when i was still in the government as a senior executive. i have written about it. i remember what happened during the 50s and 60s and 70s. national power wheats used against reporters and activists. those were protesters. those who became designated enemies of the state. at one point, one man was declared to be the most dangerous man in america. i became an enemy of the state. i will tell you that without equivocation, the surveillance system, the illegal surveillance system put in place after 9/11 and grew from there, dear member that incident? if you follow what is going on,

it is very interesting like dick cheney is saying unapologetically. because he kept the truth, apparently, from his own president regarding senior officials who were about to resign over this secret domestic service program. why is that? because it was illegal. i will simply tell you that an aspect of that program, i believe it has gone through some name changes. included surveilling reporters and journalists. if you wire the electronic system, it makes it difficult unless you engage in other means to get information to a reporter or a journalist. obviously, if you are concerned about disclosures that are unauthorized, wow, keep a tab on

any and all connections. that not just white ends know for a fact that that actually took place in secret. this is no different, but on a larger scale. it was what happened in the 60s and 70s. wiretapping reporters and journalists finding out who their sources were. if you know who the sources are, i'll just go after the source. so here is where it gets disturbing. this is another paradox of what happened. on and off the record, any number of them have told me privately. it is chilling. even long-time deep sources of

government are increasingly reluctant to speak even off the record. even on deep background. why is that? they are afraid. do you know what it means to be afraid of your own government? because of just the possibility that they could get tipped off if you have contact with a reporter? i never imagined that that would happen on such a large scale in the country. some the best reporters are experiencing precisely that. being frozen out from their own sources because of fears that the sources have of their own government. it is part of a criminal case. things that were shared in his book, he got subpoenaed three

times. he is the only witness to the crime. >> are you concerned that young americans are growing up with a little sense of privacy and the implications of the privacy right in future? >> i have a son who is 17 years old. he is extraordinary. we have had long conversations about what happened to me and what has happened in this country. he has only known this world post-9/11. he knows no other world. most of us in this world actually remember a pre-9/11 world. i would like to return to september 10. the price is way too high. it is way too high.

our younger generation will inherit what we leave behind. they are the future leaders of tomorrow today. what legacy will we have them take? what legacy will we leave behind? one of the fundamental principles of who you are as a human being, which was enshrined in the constitution is also in the fourth amendment. that you are secure. i talked not just my son, but other people that i work with in their 20s and '30s. and i have asked them point blank, where do you draw the line? one of them told me recently that i draw the line at the shades of my window. anything that i do behind those shades is private.

and that includes the use of cell phone and electronic media. he chooses what he will share that is public. just because he is private does not give the government license to violate our that privacy without due process, which includes probable cause to an affidavit that you have to bring forward in front of someone in an article three courts. if the powers do not extend to simply subverting what is properly given to article three in the constitution. privacy doesn't matter. it is the essence of who we are. we don't have that, there is something at stake for all of us. in terms of fundamentally what it means.

it is not their choice. it is not their right to then turn what is the right of ours into a privilege. but they sanction and control and monitor and dispense. that is precisely what is happening. that is precisely a world that i do not want to leave behind for my 17-year-old or any other person in the younger generation. that is not what i took an oath to support and defend. i say that with as strong as a conviction is there possibly is in terms of the language. it is that important. it really is that important to who we are. there is an idea, and i have heard this internally when i was at the nsa. if you are doing something in private, you might be up to no

good. we need to have access to that. did you know there was a plan in the obama administration to provide the intelligence community, which is a misnomer, by the way, to have the intelligence establishment have access to any and all records. what is there left to defend? you take away the essence of everything there is about that because there could be a chance that you are doing something wrong. what is happening? we are in this space where anything is suspicious. any and all data. in my case, i was utterly framed. not only was information mischaracterized, but misrepresented and that time even doctored. what does that tell you? because it is all done in secret. you become a target of the

government. i have lived this for five years. you become a target of the government. it's not a life that i want anyone to live. another thing to share with you, and i have not said this directly. everyone was associated with me either because i used to work for me or had links to me or typed me, by association, that freedom to do so in the first amendment, investigated, interrogated, and some of those people lost their jobs and their livelihoods because of their association with me. it meant that they were guilty. and they were going to be punished because of the association. there are other things i can't even talk about because they are so personal. including how far they went to

destroy my life and those of others. do you know what freedom really means? when you are about to leave everything there is a who you are, that's when you realize what is most important. that is the oath that i took. the president promised to protect and defend. there is a special oath that he takes, written in the constitution. you don't use the cover of that to engage in secret interpretation of law and withhold what you say is legal from congress. congress is congress is the only body that actually gets the legislature -- he gets to sign into law. we forget the foundations of our own constitution. we live in a very different time. you know, the founding fathers had their own contradictions.

i understand all that. i have heard all the arguments. the very program, the torture program, they sponsored torture. fifty-four countries have cooperated. what does that tell you about who we are? i was told that we are different, we will never do this, because we are americans. we are americans. well, okay, we are americans. >> we are almost out of time. but before i asked the last question, i would like to remind you about her upcoming speakers. on march 18, we will have a speakers practice with reince priebus, he will discuss the forward strategy of the republican party. burn on march 20, the public charities work. in a march 26, robert johnson will be our speaker.

and i would like to present the guests with the traditional national press club coffee mug. [applause] >> i will pour a little truth in it and share it with you all. [laughter] >> for the final question, you were profiled on 60 minutes and on the daily show. would you say did a better job? scarpelli or john stuart? >> both. >> how about a round of applause for our speaker. [applause] >> thank you for coming today. we are adjourned. >> tomorrow we will continue our live coverage of the conservative political action conference. we will have special speakers,

including sir palen and nra president david keene. author and commentator and coulter and ted cruz. join us on saturday after "washington journal" at 10:00 a.m. eastern on c-span. >> we want to welcome you back to "the wall street journal." thank you for being with us. party lines have approved a budget by about 12 to 10. >> on the house side, the proposals are very much mission statements. we don't expect to get much support from the other side. the house republican plan would balance the budget by cutting spending across the board and a bunch of different programs. everything from military

spending, overhaul medicare, medicaid, the food stamp program. things like that. it would cut spending by about $5 trillion over 10 years to balance the budget. that would eliminate the deficit. on the senate side, we have accommodation of raising taxes by getting rid of unspecified tax loopholes and also cutting spending in areas like on subsidies and making changes to programs like medicare and medicaid. the democrats are pushing forward their plan. but right now there is no bipartisan plan to merge. in this slow and thoughtful thing, we will have to wait and see. >> i know you don't like the editorials from the publication "the wall street journal." this title is a key to the senate democrats play a role in the budget negotiations.

beginning with these words, ring the church bells and set up the white smoke. senate democrats have released their first budget in four years. give patty murray credit for finally proposing something in public view. but after reading the document, we can say we can see why the democrats were so reluctant for so long. then the editorial spells out some specifics. >> they did not put forward a budget for warriors. we went through a crazy for years with the economy. we went to the financial crisis and the deficit kind of blew out. i think that democrats are finally trying to get back in regular order in the senate. max baucus is an interesting figure. they can do any tax changes or it entitlement changes that went through the committee. so he is sitting back and waiting for the issues to come to him. he has already had tax reform

hearings. so he is one that will watch this move forward. >> democrats need only 51 votes to pass the budget outline. no doubt it will, but we can't wait to see which senators get lined up as potential sacrifices. the senators running in 2014, mary landrieu, mark begich of alaska, they might get a pass from harry reid. >> that is right. they control a couple of things, but we know that republicans are struggling with the same issue. the president is trying to give someone public and senators to work in a bipartisan way. but there's a lot of consternation in the house about house republicans. going after conservatives who look at tax increases as part of a deal. there is pressure from the left and right not to accept the

deal. >> there was an editorial cartoon about someone reading the romney and ryan budget blueprint. and if it was the 2013 ryan budget. but essentially not a big difference between last year and this year. >> the biggest isn't spending. the romney and ryan ticket win after increased defense spending from we are now. it is about $100 billion more than what paul ryan proposed a few days ago. so that is a big difference. it made it easier for him to balance the budget by having lower levels of defense spending. would've been almost impossible to balance the budget over 10 years. >> what about what was put forth by senate democrats and house members? the increases that he wants or about $600 over 10 years. democrats want an increase and

i'm sure republicans way for democrats to figure out where they are. democrats are talking about getting rid of tax breaks and taxes. limiting the values of certain tax breaks. that is what they are talking about right now. they want to get rid of the tax breaks and get rid of them. >> the paul ryan plan a party takes into account these rates approved by congress. >> yes, that is right. about $600 billion in new taxes over 10 years. it helps to balance the budget. >> any surprises from the senate budget committee markup yesterday? >> well, a little surprised that she was able to hold the line. ten republicans and democrats on the committee. but she could not afford to use a single one.

she had both of them support the deal. so the process move to the floor, which will make it much easier for her to pass. >> we want to share with you two things. the senate budget budget committee with a focus on the rising debt, increasing over trillion dollars per year for the last for five years. >> gas. >> is the exchange yesterday with a republican from wisconsin. >> the cbo starts with $26 billion worth of debt. then they include $800 billion and $200 billion. that is $1.3 trillion. 24.27 versus your number is -- until we can agree on basic numbers, how we ever come to agreement in terms of policy differences? >> some of those are policy differences. >> they are not. >> some do not believe that we

need the disaster money. so we build those out of the baseline. also to what the senator said, getting rid of this and fully replacing it. it is laid out in writing. >> what you want to do is compare apples to oranges. i am turning these things apples to apples, apples to apples. in 2023, yours is 24.3 trillion. i would really appreciate it if you stop claiming $1.85 trillion for deficit reduction. that is false. >> what was going on or? >> we were talking about baselines and a confusing process. how do you measure what the proposal be over 10 years. democrats and republicans are going to fight about this. the issue that people should take away is that tax increases

can be phased in. the republican plan has no new tax increases. that is really the flashpoint. >> correcting myself, it is increasing so much, if you go to the u.s. ... or, it is now growing. >> that is right. members had been set at a specific level. now they have uncapped it until may 16. the government can continue to burn off what they need to finance the government. then they can have a couple more months. so we will be close to the chili dollars in debt later this year. >> phone lines are open. you're welcome to join in. join us on facebook or send us a tweet. we will get to your calls and comments. >> the house has to pass their

budget resolutions. then the senate has our he passed theirs. i think these things will be happening next week. the question is, i think there is actually going to be seen what happens on the house side. the republican caucus is a little bit less predictable. so if they can keep it and get it through, then we can begin this with the democrats and house republicans meet and try to iron out the differences. that will be very difficult. but it's kind of the movement needs to take place if they want their budget deal later this year. >> part of the plan is to raise taxes on wealthier americans. the house republican plan to eliminate the affordable care act. is either likely to happen? >> repealing the affordable care act seems like it would be a very tough thing to do.

the president would have to sign off on it. i don't see how that would happen. they could try to make changes to the law. i will not rule out that possibility. on a tax increase side, it's very hard to tell. speaker boehner made clear that they are still -- they are definitely not willing to accept new taxes. mitch mcconnell said the same thing. they are not willing to accept new taxes as part of the deal. democrats insist so we're just going to have to wait and see whether one site flinches or they come up with a reform mechanism that allows both sides claim victory. >> in "the new york times" come to speak of the house sits down he points out the budget is an opportunity to lay out your priorities for what your party believes in. what exactly you are budget dies. reaffirming his claim that republicans will not support any additional tax hikes, indicating that we are to give the president a tax hike. i want to mention this headline this morning.

look to speaker boehner, it has lawmakers worried. they will be targeted in 2014. >> that is right, the republicans have really seize the moment. the democrats seem to be playing an offense during the talk. a lot of americans say, we have tax increases come with focus on the spending cuts. they often say that they will try this for the next month. >> if you are listening on c-span radio, we welcome your call. 212 is the area code. the numbers are on your screen. let's summarize what is in the health plan. under the senate budget plan, which was approved yesterday, which we covered, $975 billion in targeted cuts with regard to health care, military, and other

programs, and raises $975 billion in new revenues from closing tax loopholes. $100 billion in stimulus spending focusing on job training and infrastructure. the house republican plan has $1.8 billion in savings from the repeal of the health care law. that leaves a trillion dollars as a result of sequestration and includes $962 billion in cuts from agriculture subsidies and food stamps and reduces money for medicaid and changes to medicare. also $800 billion in savings from interest is the that comes down. $249 billion in discretionary spending cuts as well. >> that is right. medicare and medicaid, those tend to be the most polarizing on capitol hill. were lawmakers have dug in the most. there are major financial impacts. those are things we should watch

for. they are not really talking about social security right now. everyone is really nervous about backlash. the white house has tiptoed out to say that they will accept some changes in the way that inflation is measured. so that is something the democrats have put on the table. >> speaker boehner said he wants the president to give specifics on entitlement reform. where the money will come from. has the white house been vague in that area? >> yes, they have a little bit. they said they want to get around $400 billion in savings. but they haven't specified exactly how that would work. something we will watch for is a week of april 8, when the white house put forward their new budget. it will have to be a lot more specific about tax and spending. >> the president wrapped up 40s of meetings on capitol hill and he met with the house democrats and told the democrat

party that republicans aren't going to go along with tax increases, so don't go along with entitlement reform. >> that's right. one thing that we noticed is that they are not going to go backwards for a deal. they are just going to walk away and be satisfied with the $2.5 trillion. >> we have caller from north carolina. welcome to the program. >> caller: thank you. i have a question. trade-offs to take, things like that. you said that one of the people said it would take 61 votes to pass the bill in the senate. i thought maybe 59 or 58 would

pass it. or if there was a tie at 50, we have a vice president who would then break the tie. can you explain that? >> one thing that is interesting is a lot of times we need 60 votes to break a filibuster. you would think that if they had gone, instead of the proposal that patty murray put forward, if they went with a more bipartisan proposal, they could potentially get 77 votes. that is what we talked about during the fiscal cliff negotiations. they are definitely barely squeaked by. republicans will do the same thing, and then we will have to see where we go from there. >> is sequestration here to stay? well, that's a great question. it depends on what lawmakers start to feel.

we are hearing a lot of municipal agencies really fretting about how they are going to manage cuts. it is another time when we could see more consternation. because there will be a cut of things coming out. >> there are some potential staff layoffs on capitol hill. >> yes, it seems like it will be impossible for them to absorb cuts without major changes. whether that's reduced hours, whether they stop running trains, i see the layoffs are going to have a huge impact on people's abilities to spend money. we really don't know what the effect will be.

it could take weeks and months that play out. >> to the democratic budget address the social programs with unfunded requirements? .. .. we had a $220 billion surplus and it was a great economy with

bipartisanship. i think it's very silly that obama would not compromise. it's too little too late to compromise now. sequester has happened. sek 12 years old, i don't want to pay off this debt. it's not fair. if we don't do anything about medicare, the benefits full text and we'll get hyperinflation and i will be very bad. >> host: you've answered part of our question. you sound young. you weren't even here when bill clinton and newt gingrich were hammering out the budget negotiations. faisal interested in this topic is such a young age? >> caller: look, i get interested in politics about two years ago. it started basically with the affordable care act when my teacher said it and i got very interested and started reading articles. i'm now very interested. i supported mitt romney and the election begrudgingly because we really have no can to reduce

movement anymore. we haven't had any conservative candidates. read john mccain, mitt romney who are republican by names and it didn't work. >> host: i am just amazed at age 12 you sound very sharp and very smart. where do you go to school, jacob? >> caller: i go to a private school, a jewish school in virginia. >> host: any interest in running for public office down the road? >> caller: may be, i hope. >> host: who are your political heroes? >> caller: i like newt gingrich, eric cantor. i know him personally and i go to school with his nephews. i like newt gingrich and eric cantor and michelle bach in. >> host: how did you become so smart on domestic politics? >> caller: i don't know. i just read articles. >> host: thanks for the call.

>> guest: it's amazing someone like this can't go, but voters have about 110 the job knowledge. post what you were 12 years old could you colin -- >> guest: i was from the eating dirt in the backyard. >> host: curtis in texas, independent line. can you talk? >> caller: it doesn't make any difference what they do. it's going to come back to the middle class. it always has, it always will and we will be the ones to bill the government now. they let the bitterness go to the cayman islands. they let them put their money so they don't have to pay taxes and yet they buy other business in the united states. they buy the smaller businesses and were going to end up with one big corporation and pay one big lump.

thank you. i enjoy c-span two watch it nearly every day. >> guest: he raises an excellent point. it's impossible to see how they restructure programs over time without having a major impact on the middle class, but the taxes they pay in the benefits particularly when they turn 65, 66 to retire. it's impossible to see how the middle class stays away from changes. >> host: what we have a budget by october 1st? >> guest: that's a good question. the biggest question right now is the debt ceiling in july and august could be the next powder came. both sides seem to be shying away from a showdown over funding the government. they don't want to risk a government shutdown because both sides can blow up in their faces. that's probably a safe die. >> host: to join on c-span

radio, which is her coast-to-coast, our guess is damian paletta covers the budget and economic policy issues for "the wall street journal" is joining us from clinton, maryland. our life for democrats, good morning. >> host: can you hear me okay? >> guest: if you turn the volume down, we'll hear you much better. >> caller: nobody's talking about jobs. we need to focus more on jobs and cutting the budget. our going to get out of the situation is people are paying taxes. so we are worried about cutting back and we need to go forward with jobs. with the sturdy programs, they're going in the hole. we don't want to do that. we want to move forward. we have an election and the people said they wanted to go with the democratic plan to rescue our economy. we're still fighting republicans

about pre-election issues and we should be trying to follow what the american people want. the american people want us to produce jobs and raise taxes to appoint out of the deficit and that cuts programs in business in a position where we were before. i'm asking the american people to wait in the administration. we can't do anything. we have to meet until congressional elections take place and maybe we can take this congressional majority and get something done. i'll put us back to where we were before. >> host: tom, thanks for the call. >> guest: in addition to putting president obama in the white house, they think that's the best way to get a compromise on these issues. a sober looking at right now. the job seem so tricky. we might see a bit on the jobs

market. after the fiscal cliff was a result, employers might feel more comfortable being aggressive and hiring, considering the doom and gloom on the deficit at the start markets at an all-time level that makes you think the economy might be giving were overheated. he seems to be a division between the economy and stock market. >> host: looks like jacob is creating interest on our twitter call. jacob from virginia, more articulate than any others who call into c-span. let me go back to "the wall street journal." ron johnson a minute ago indicating he predicted republicans would struggle to reach any sort of a grant budget target with the president. >> guest: for years and years democrats want to raise taxes to reduce the deficit. here just raising taxes. spending the problem.

can the democrats get some taxes as part of any deal that will accept some compromise or his taxes up the table and they can't get anything done? >> guest: will look at what senate democrats are looking forward to your kernel to the program from jacksonville, texas. good morning. thanks for taking my call. the thing that bothers me about our government today and this is both sides is the lack of transparency. we're going to cut out the loopholes, but nothing is ever mentioned. i don't know if they think we are too to understand what those loopholes that the end what they would mean. it just really frustrates me. as far as budget cuts, it should start with the politicians and let them live in government

housing like they expect everybody else to it's been hot up by the government. get them out of their fancy places to live and if you want to get something done, put them in a room together. bring them food and water, but no showers until they get this thing ironed out. i know that's pretty drastic, but these are drastic times call for drastic measures. >> host: no one would want to go near the stinky politicians. it does raise a good point about taxes. both parties are vague about whether post they would cut. the reason they do that is because they don't want to eliminate or limit the mortgage deduction, which is popular among homeowners. if you want to raise revenue or make changes to the tax code, you may have to make changes to the piece.

they know they would unleash a firestorm of groups coming to the to push back if they got specific about what tax breaks they wanted to do. >> host: with a cover in the house budget and senate budget committee hearings. watch them on the website at c-span.org. one of the exchanges during the market this week the ranking democrat is chris at holland of maryland. 39% to 29%, cutting the rates by more than one third, will hold another revenues constant. just last fall the nonpartisan tax policy center data and analysis of a farmer modestly in the governor romney. she reduced her 35% to 28%. they show would inevitably raise the context. an individuals making under $200,000 a year.

this budget proposal provides even bigger tax cuts to millionaires of raise the tax burden by an average of $2000. >> host: damian paletta comments to listen to congressman ben holland, the length or preach on. is there in a room for compromise? >> guest: without both parties have settled down and get out of their corners and come to some sort of an agreement. it's hard to see where they resolve issues like tax code, which remains polarizing. the changes to medicare and medicaid. we have seen the outreach that we have to give it time to see if it continues because republicans seem to honestly appreciate his outreach and willingness to sit down and talk. they're not negotiating right now. i think it's going to take time. they do run up against the july or august deadline when they can keep talking. they have to essentially put stuff on paper. >> host: damian paletta of the

wall street newspaper. >> caller: good morning. i've listened to base the republicans come on and say that. but it seems to me that republicans are only deficit hawks to serve that purpose because everyone talks about how bill clinton's balance the budget in the 90s. remember, you've to republican presidents before that and there's never any mention about the budget. until 2011, they were spending cut down to spend them. nobody discussing without any revenue. republicans didn't do what they promised to do. now they say there's no more revenue. now they have to deal with more spending. how is that you do explain to the american people what was

cutting 2011 spending and why there was than any revenue. >> host: will get a response. >> guest: 2011 came after the 2010 midterm elections which was a huge sweeping victory, and the president and how much leverage could see was against the debt ceiling. she pointed out also the balanced budget during the clinton administration. one thing he benefited from is a soaring economy. you can't overstate how much that brings in all the tax revenue without having to make major changes to the tax code to do something the president hasn't benefited from. a soaring economy can reduce the deficit. >> host: the distance between the parties on the budget. we are detected a sequestration, but they point out for additional spending cut under the democratic plan there are

none. a series of spending cuts on interest rates at $1.8 trillion in savings from repealing the health care law. democrats proposing $100 billion in new stimulus spending. republicans propose no new spending. democrats raising $975 billion annual revenue. no tax increase among republicans and then social security. no changes on social security. require the president and congress to submit plans to increase the trust fund. >> guest: social security is one of those things it has enough money in its reserves to continue paying full benefits through 2036. 10,000 people turning 65 every day in the number of people entering the program and continuing to accept more benefits than they paid out will have a time when changes are made to social security. what we hear from experts is the sooner you make the changes, the lester maddox doby down the

road. right now is a real reticence should make major changes because the political backlash can be enormous. >> host: covington, georgia, thanks for reading. >> caller: thank you so much. i want to say thank you for taking my call and i want to give history to the young man jacob from virginia. as you know, i watch you be the host for a long time. as you know that was no vote for the so-called budget. i'm from georgia and i know newt gingrich did not cooperate with president clinton. as you know when the vote came down i remember like yesterday al gore broke the vote. she broke a tie. review the history of how the republicans cooperate with bill clinton. i hope you and your guests will

give him a little more history because that was no cooperation. during the campaign everybody wanted to revise the history. being political scholars like you are, bill clinton has got no more help than president obama. as you know and i know you know this, the vote was al gore broke the same. one more thing before i move on. i'm a retired firefighter here in georgia. this budget, just like a movie adjusted. sequester is not going to hurt us. it was just like a pretty short you and steve have done with your family. we've adjusted to it. we will survive this. thank you so much.

>> host: host scott andy, thanks for the call. >> guest: and he raises some great points. remember, everyone acts like it is bipartisanship. they had a long government shut down during the clinton administration and a debt ceiling fight that made this debt ceiling fight the quake child's play. rubin had to be creative as to where he was breaking a lot of buying time on the debt ceiling. there is brinksmanship all the time and the lesson to learn from not insist that it's really hard. the same issues that are tangential issues. the server to the heart and minds of americans over the country and issues lawmakers and for election on taxes and spending, government programs and so we can expect them to walk away from their principles and beliefs because they want to get a deal. a >> host: the bottom line is

president clinton and house republicans stood before the balanced budget the last three or four years. >> host: into the bush administration. >> guest: that's right. and like i said, some of it had to do with the roaring economy. they definitely made changes to the welfare program and other spending programs in a way that eliminated the deficit, which was something in u.s. history was incredibly hard to do. >> host: jacob is very intelligent. the 12-year-olds don't speak that way about the radicals of either party i would say the same. join the conversation. people commenting on 12-year-old jacob from richmond, virginia as they talk about the budget coming out passing the senate budget committee. michael is joining us. centerville virginia, republican line, good morning.

>> caller: my responses to minuter colors, particularly tom from maryland who mentioned the voters last election voted for the democratic way of fixing our economy. i honestly think this is very inaccurate. many americans are one issue voters. what this administration has very carefully and successfully done was divide the country. you had the latinos and émigre community voting for the anticipated amnesty program. you had the community waiting and voting for other issues that pertain to them. so the reelection of barack obama. if someone wants to look at a true measure for the successful steps that the obama administration had done countless look at the election

of 2010. they have retained seats and victory is not done in 50 years and that shows there early on, after only two years of the apothecary that people are not happy about this leading us to distraction. we are headed down the same road in my opinion to where many of the european countryside. >> host: michael, thanks for the call. one other point about the clinton budget. another difference about the debt crisis, our economy was not as fragile. >> guest: are still recovering from the financial crisis. a lot of unemployed at 7.7% makes it harder to focus on austerity and reducing the deficit would you still have so many people out of work. they can't pay their taxes and they're holding back their whole

recovery. >> host: press secretary jay carney put forward a part that is a percentage of gdp the debt is actually lower than it was when barack obama first took office. you deal a lot with numbers, but what was he referring to? >> guest: year-to-year deficit. in 2010 the deficit was $1.4 trillion. that's a gap between government and, about $3.3 trillion euros of revenue that comes in. this here expecting to see around 800, 850 billion. that's a lot of money. it's about five to 6% of gdp, but nowhere what it was. it does have a difference contracting like this, mostly through better tax revenue because the economy is improving and spending reductions since

2011. >> host: are last call for art in omaha nebraska. good morning, in dependent line. >> caller: good morning, seles. i'm just listening to these people calling in and i want to tell everybody that i used to be a democrat. the problem i see right now is all of this steve that are run by democrats, they can't balance a budget. they are considering bankruptcy. on the republicans have their problems, too. and people don't realize when they hear millions comment dilettantes and trillions. but there is a difference.

a million seconds goes by in less than 12 days. a billion seconds takes 31 years to go away. dad and a trillion seconds, we'll go back to the stone age in the year 29,718 plus or minus. if people can understand that, were going to be just like eric. >> guest: one thing mentioned was the situation in the state, particularly california when the budgets are completely out of whack. we are seeing states make progress. virginia is doing really well. california has made progress at their situation under democrats and republicans with much different strategies. that something lawmakers will watch what strategies work, what can they learn from and things they should avoid.

>> host: the republican plan by paul ryan and now the democrat plan. i.d. starting points on how they move ahead over a day. political documents used against one or another? >> guest: paul ryan has moved his proposal from what it had said. he seemed eager to work with the white house and democrats going forward. he didn't say this is my line in the sand. democrats await to see what president obama poses as a new starting point for democrats. they seemed to be willing to engage in a negotiation about deficit reduction. the question is are they willing to walk away as they seem to be right now if they don't do what they want? the answer seems to be right now yes. >> host: damian paletta for "the wall street journal." his work is online at wsj.com.

>> a senate hearing on whether $6 billion in trading losses by jpmorgan chase. >> former current jpmorgan chase executives testify today and

failed 19 practices that led to the firm's $6 billion in trading losses. this is a two hour and 20 minute portion of the hearing by the senate said committee on investigations. >> when they first began by extending the special will come to the new ranking member of the subcommittee, your longtime friend senator mccain, not the first time we worked side by side. i longtime member and former ranking member -- was ranking

member of the senate armed services committee and has brought a great energy and bipartisan spirit to her work together and we just want to welcome him as their new ranking member here. senator johnson is a new are here, unlike senator mccain has been a member. what about him him in april 2012, americans were confronted with a story of wall street excess in the derivative disaster now know as jpmorgan chase will trade. the largest u.s. banks are deep and derivatives, which are complex instrument, which derive value from other asset. the derivatives behind the jpmorgan will trace the part of a so-called synthetic credit portfolio sometimes called an sep that essentially made out

sites that on whether particular financial instruments or entities for credit worthy of a default or specified time periods. the best or maybe cheaters in the london office of the u.s. banking giant jpmorgan chase. their trades, meaning their beds grew so large that they wrote the $27 trillion credit derivatives market, single-handedly affecting global prices and finally attract a media storm in finding out who was behind them. that's when the media en masse to jpmorgan investment office, which until then had been known for making conservative investment with bank deposits. at first, jamie diamond in the april media reports about the wheel trays or a tempest in a teapot. and let later the bank admitted

the truth of their creditor of the defense had gone south, producing not only losses that eventually exceeded $6 billion, but also expose any of the air risk management problems than what had been considered one of america's safest banks. jpmorgan chase is the largest financial holding company and the souls of the largest derivatives dealer in the world and the largest participate in world credit arcade. it is portrayed itself as a risk management expert with the fortress balance sheet finisher is taxpayers have nothing to fear from its extensive dealing and risky derivatives. but that reassuring portrayal was shattered when will trade boss is shocked the investing public that with only minor to a losses, but the financial risks have been largely known to regulators. the subcommittee meets after nine months of digging into the

facts behind the wheel trade. the subcommittee collected nearly 90,000 documents and has issued a 300 page bipartisan report. the bank regulators have cooperated for farmer jpmorgan employees directly involved declined to cooperate because they reside on the sub subpoena authority. our attorneys have been a window into high-stakes derivatives by big banks. it exposes derivatives trading culture by jpmorgan that hid losses, this disregarded moment that manipulated models that dodged oversight and misinformed the public. i investigation brought home one

overarching fact. they may have significant vulnerabilities attributable to major bank involvement with high-risk derivatives trading. the four largest u.s. banks control 90% of u.s. derivatives market and profitability is invested in part to derivatives holdings nowhere more so than the jpmorgan. credit derivatives have purchased in massive quantities complex components can become a runaway train, barely through every risk limit. the wheel trays also demonstrate how to admitted the valuation practices are easily manipulated to hide losses, harvest controls are easily manipulated to circumvent events. to load up on risk for. firing a few traders said the buses will be enough to stanch

wall street's insatiable appetite for risky derivatives bets or stop the excesses. more controls are needed. among the most troubling aspects of the wheel trade case history is the jpmorgan traders who were required to put the value of derivatives holdings every business day, use internal profit bust reports to hide more than half a billion dollars in losses in just three months. eventually those misreported values forest jpmorgan to restate its earnings for the first quarter 2012. but to this day, jpmorgan maintains the mismarked values did not on their face by a late bank policy or general except that accounting principles. it's derivative books can be cooked as blatantly as they wear without breaking the rules, the rules need to be revamped. given how much major u.s. bank

profits remain bound up with the value of their derivatives, derivative valuation that can't be trusted very serious threat to our economic stability. the wheel trays also demonstrate how easily a wall street bank can manipulate and avoid risk controls. the financial industry assures us he can prove they manage high risk it cavities because they are measured, monitored and limited. as the subcommittee reports in detail, jpmorgan executives ignore a series of alarms that went off as the bank's chief investment office breached one risk limit after another. rather than ratchet back the risk, jpmorgan personnel challenged and reengineered to this control to silence the alliance. it is difficult to imagine how the american people can trust major wall street banks to prudently manage derivatives

risk when they personnel can readily cable or ignore the risk controls that are meant to prevent financial disaster in taxpayer bailout. the wheel trays also provide another of the major wall street banks misstate thin concealment. in fact, in january 2012, the bank told the ucc, office of the comptroller of the currency inaccurately that the portfolio is decreasing in size when i wasn't. the struggling novell when the media spotlight hit the senior bank executives mischaracterized to investors and the public the nature of the wheel trays in the extent to risk management and regulatory oversight gambling apparently the portfolios that bets would recover before anyone took a closer look. we took a closer look and it isn't pretty.

a massive derivatives portfolios riddled with risk on a runaway train of derivatives -- a runaway train blowing your risk on it, hidden losses, bank executives are downplaying the bad guys, regulators who failed to act. together these facts are reminder of what occurred in the recent financial crisis. we just can't plan a major bank to resist risky bet, honesty report derivative losses or disclose bad news without a strong regulator looking over his shoulder backed by laws that required transputer c. risk limits against us is that consequences for misconduct. that's the big picture into here's a few of the detailed finance for the investigation. first jpmorgan chief out this rapidly amassed a huge portfolio

of synthetic credit derivatives in part using federally insured depositors funds in a series of short-term trades only after intense media exposure. in just a few months during 2011 has shown on charter one and i think we can get charter one over here. the synthetic credit portfolio grew from a net notional size from $4 billion of venture boat in the first quarter of 2012 to $157 billion. that exponential growth but virtually nonregulatory oversight. once the wheel trays were exposed, jpmorgan claimed to regulators, investigators in the public that trays were designed to hedge credit risk. internal bank documents fail to

identify how the lower risk or why this supposed derivative hedges her different from other hedges as chief investment office. if the straits first jpmorgan name came gone astray, it remains a mystery how the bank determines the nature criticized or effectiveness of the so-called hedges in the fidelity reduced risk. the chief investment office internally concealed massive losses in the first several to 2012 by overstating this and other credit derivatives. it got away even then counterparties in the face of two internal bank reviews. as late as january 2012, the cio via this creditor if it is by using the med point and the daily range of goods and masks in the marketplace to value

derivatives. getting of late january, the traders stopped using midpoint prices and started using prices at the extreme edges of the price range to hide escalating losses. in recorded phone conversations, one trader described his stomach says idiotic. at one point traders used a spreadsheet to attract how large their deception has grown by recording the valuation differences between mid-point in more favorable prices. in five days in march according to the traders spreadsheet, and hidden losses exceeded $400 million. the difference eventually exceeded $600 million. counterparties began disputing the cia's book values involving hundreds of millions of dollars in march and april.

despite the obvious value manipulation on may 10 the same day they last $2 billion, the sign off on the cio pricing practices as consistent with industry practices. jpmorgan leadership has continued to argue the value assigned a traders to the synthetic credit portfolio were defensible under accounting rules. getting july 2012, the bank was not only restated it earnings. it did so only after an internal investigation listed the phone conversations or two they recorded by the bank in which it's traders not send valuation part essays.

they're mismarked values were wrong simply because the traders intended to understate losses. they were wrong because they changed their pricing practices after losses began piling up, stop using the mid-point practices -- stopped using them at point prices they'd used up until january and the began using aggressive prices that consistently made pink reports that utter. until jpmorgan another stop to personnel from playing those kinds of games, derivative values will remain an imprecise valuable or untrustworthy set of figures that call into question the derivative profits and losses reported by our largest financial institutions.

fourth, when the synthetic credit portfolio breached by his key risk limits, rather than reduce trading at cavities, jpmorgan either increase the limits change the models wrister turned a blind eye to the bree cheese. as early as january 2012, the rapid growth of the synthetic credit portfolio preached one common measure of risk called value at risk or var not just at the cio, but the entire bank. it is reported to bank officials including ceo jamie diamond who personally pretty temporary limit increase in the breach send it. cio employees hurriedly push through approval of a new var

model but overnight dropped the cio's purported risk a 50%. regulators were told about reduction in the reported risk, but raised no objection to the new model at the time. the credit derivatives breached other limits as well. in one case that exceeded established limit on one measure named as credit spreads are one by 1000% from its running. when regulators ask about the breach, jpmorgan managers respond it was a sensible limit and a lot of debris should continue with still another risk measure project at the synthetic risk -- the synthetic credit portfolio could be $6.3 billion in a year a senior cio risk manager dismissed the resellers guard page.

it wasn't cartridge. that rejection was 100% accurate, but treated two administrators thought they knew better. downplaying risk and pushing to artificially lower results flatly contradict jpmorgan's claim to prudent risk management. at the same time the portfolio was losing money in breaching risk limits, jpmorgan dodged the oversight of the occ and omitted cio data from reports and failed to disclose size, risk and losses to the credit portfolio. had to later tinkered with requests for information by giving the regulator inaccurate or unresponsive information. in fact, when the wheel traits first became public, the bank offers such link and reassurances the occ initially

considered a close. only when it exploded the occ took another look. the failure of regulators to act sooner can't be excused by the bank's behavior. the occ also thought on the job in to investigate out to pull sustained risk limits reaches and tolerated and completed missing reports from jpmorgan asset to question the banks they value at risk for var model that dramatically lowers the risk rating. except he jpmorgan's protests or reports about the portfolio were overblown. it was not until may of 2012 after a new controller took the reins that the officials instituted their first intensive inquiry into the synthetic credit portfolio. again with the lessons of they to decimate financial crisis of painfully fresh it is deeply

worrisome should seek to cloak its risky trading activities from regulators and deadly worry son was able to succeed so easily for so long. finally, when the wheel trays of public, jpmorgan misinformed breaking leaders and the public about this data credit portfolio. jpmorgan's first public response to the news reports about the wheel traits with a spokesperson approved a senior executives told reporters april 10 the whale trades were known to regulators, a more detailed description in a conference call held april 13 with investment analysts. during the cold, chief financial officer douglas baustein inaccurate statements and that is shown in chart two. he said that trades could be put

on a pink risk managers come are fully transparent to regulators. he said the treats are made on a long-term leases. he said the truth are essentially a hedge. he said the big bully the transfer can assist in with the rule that prohibits high risk for prior trading by banks. the statement on april 3rd team were not true. as latest in a 10, big ceo jamie diamond repeat it the prescribed describes the public traits as hedges me to offset risk despite information show in the portfolio was not a hedge. the bank also neglected to tell investors the bad news that the derivatives portfolio had broken through multiple risk limits, losses had piled up in the head of the portfolio had put enrichment of the portfolio into crisis mode.

it was recently reported the biggest u.s. banks had a five-year loan percentage of the deposits used to make loans. loan to deposit ratio has fallen to 84% in 2012 down from 87% a year earlier and 101% in 2007. jpmorgan has the lowest ratio debate banks, lending 61% of deposits out of months. apparently was too busy betting on derivatives to issue the loans needed to speed economic recovery. based on its investigation of the jpmorgan while trades, our report makes the following recommendations. first, when it comes to high risk directives, federal regulators need to know what major banks or two. we should require banks to identify internal investment portfolios that include

derivative server specified size to require periodic reporting on derivative performance and conduct regular reviews to protect undisclosed derivatives trading. next in banks claim they are treating derivatives, the hedge risks be to require them to identify the assets being hatched, how the true history produces risk associated with asset and how the bank tested the effectiveness of its hedging strategy of reducing risks. we need to strengthen how derivatives their value to stop inflated values. regulators should encourage banks to use independent pricing services to stop the games, require disclosure disputes with counterparties and require disclosure and justification when this occurred to jpmorgan derivative values deviate from it point prices. next on risk alarms go off, banks and regulators should

investigate breaches and take action to reduce risk it could be days. max, federal regulators should require disclosure of music and demented risk model or magic which implements material lower purported risk and investigate changes are added for model manipulation. three years ago congress tonight did the dodd-frank act, also known as the volker rule to and high-risk proprietary batting using federally ensured deposited. financial regulators ought to finalize long-delayed implementing regulations. next, major banks trade derivatives, regulators need to ensure banks can withstand losses by having adequate capital charges for derivatives trading. it's way past time to finalize the rules implementing stronger capital bank standards. the derivatives trading that produced while trades damaged a single bank.

the wheel traits are exposed problems that reach far beyond when london trading desk or one wall street office tower. the american people a party suffered when devastating economic assault rooted largely in wall street access they cannot afford another. one wall street place of fire, american family skippering. the task of regulators of this congress is to take away the matches. the wheel trays -- whale trades demonstrated is far from complete. >> let me begin by saying what an honor it is to serve on the subcommittee, which is a long history of bipartisanship of uncovering waste fraud abuse and outright corruption. before i move forward, i want to express my gratitude to you and the members of your staff were on yielding and dedicated efforts to this investigation.

i'd also like to recognize the work of my predecessor in the subcommittee, senator coburn for contributions prior to my arrival. this investigation has revealed startling failures that an institution that touts itself as an expert in risk management and price itself on its fortress balance sheet. the investigation also sheds light on the complex and volatile world of derivatives. in a matter of months,, jpmorgan is feel it to this increased exposure to risk while dodging oversight by federal regulators. the trade ultimately cosseting villains of dollars in shareholder value. these losses come to light not because it admirable this management strategies by jpmorgan or because of effective oversight by diligent regulators

instead, they came too late because they were so damaging the ship the market and so damning that they caught the attention of the press. following the revelation these huge traits are coming from jpmorgan's london office, the banks continue to grow. by the end of the year, total losses stood at a staggering $6.2 billion. this case represents another shameful demonstration of the thinking gauge the one of the risky behavior. the london whale infinet honors because the traders were making risky diocese and access deposit, persons of which were federally ensured. this deposit should've been used to provide loans for main street businesses. instead, jpmorgan used to bet on catastrophic risk. through an intensive good bipartisan investigation, said

committee has uncovered a wealth of information, internal e-mails, memos reveal these traits are not cannot did papered rogue traders, but that their superiors were well aware that committees. traders said jpmorgan chief investment not this adopted a risky strategy with money they were supposed to use to hedge our counter risk. however, even the hide could only provide a testament as to what exactly the portfolio was supposed to hedge. jpmorgan ceo jamie diamond at the portfolio had morphed into something that created new and potentially larger risk. and the words of the primary federal regulator, it would require that the leave voodoo magic to make the portfolio actually look like a hedge. top officials allowed the successive losses to a core by

permitting the cio to continually reach all of the bank's own risk when it was the risk limits threaten to impede risky behavior, they decided to manipulate the models. disturbingly, the bank's primary regulator failed to take action after red flags warns jpmorgan was preaching at limits. regulators fell asleep at the switch and failed to use tools to effectively curb jpmorgan's appetite for risk. however, jpmorgan actively impeded the oversight. the cio refused to release data and even claim the regulator was trying to destroy the bank's business. after the losses aren't covered by the press, jpmorgan chose to conceal its errors as doing so

top officials misinformed investigators, regulators and the public. in april 2012 earnings call, chief financial officer douglas baustein falsely told investors and the public that the bank had been fully transparent to regulators. the deception did not end there. during the same earnings call, mr. diamond seemed to downplay the significance that infamously characterizing them as a complete tempest in a teapot. the truth of the matter is $6 billion, some of which is federally insured is an inexcusable amount of money to be gambled away a risky bet. this investigation potentially reveals systemic problems in our nation's financial system. the size of the potential losses

at the misguided and dishonest actions the banks took during the financial crisis four years ago. let me be clear. jpmorgan completely disregarded risk limits stonewalled federal regulators. it's unsettling to perpetrators made reckless decisions is federally insured money and office has done the full awareness of top officials at jpmorgan. this bank of yours to as entertained and indeed embrace the idea that it was quote too big to fail. in fact, with regard to how it managed derivatives that are the subject of today's hearing, it seems to have developed a business model based on that notion, the notion that they are too big to fail. it is our duty to the american public to remind the financial industry of high-stakes gambling is federally ensured deposited will not be tolerated.

in 2012, the one then we all trades resulted in a $6 billion loss. but if there is 100 billion? 's jpmorgan operate under the assumption that taxpayer won't though again? replaced as taxpayers taxpayers underwriting the big banks disregard for moral hazard having the proper operation of a truly free market. i look forward to hearing witnesses as we examine what went wrong at jpmorgan. >> thank you very much. senator mccain, senator johnson has a comment or statement? >> we don't have anything prepared. this interesting is that senator mccain pointed out to jpmorgan appears to develop its business model around the fact they are too big to fail. i've always said the factory of

institutions is simply are too big to fail shows how regulation failed us. we had regulation in place that should have presented that years ago. i'm looking forward to hearing the testimony to highlight the fact regulators in general are very incapable of preventing all these things and i'm looking forward to recommend asians in terms of how it can get regulation up to speed to prevent banks in the future. >> thank you very much, senator john said. we will call our first panel of witnesses. before we do that, let me make a comment about the procedures here today. we are anticipating a lawn care in, so we are going to first call the first panel from witnesses that the most first-hand knowledge that is essential concerning the hearing in after their testimony asking questions, there will be a short

rake. we are going to return and broaden the panel by adding two senior executives in the bank, one responsible for public disclosures about the trades and the other who led the management postmortem review. when not extended panel concludes, there will be another very sharp rate would've been here for the final panel with representatives from the office of the comptroller of the currency or occ. so i will now call her first panel of witnesses, ms. ina drew said jpmorgan. ashley bae kim and finally, peter weiland, head for the chief investment officer cio. we appreciate you being here this morning i'm looking forward to testimony. pursuant to rule six of the subcommittee, i witnesses who testified are required to be

sworn, so i ask each of you to please stand and raise your right hand. .. you you you you you you you >> we will have you go first. then we will turn to questions. please proceed.

>> if you could keep your microphones on, that would help. >> good morning, thank you for the opportunity to provide my perspective and the losses incurred. as you know, i have submitted a written statement discussing many details. i graduated with a masters from columbia university. over the course of my career, i have had the privilege of working for truly great ceos.

[inaudible] we must invest prudently. i have wonderful mentors who helped me to grow. and develop my leadership skills. to them, i am very grateful. this is my life's work. balancing my home life, doing charitable board work and other demands that i juggle.

in may 11, 2000 welcome i walked into the offices. with him i had a close and respectful relationship. i told him of my decision to resign from jpmorgan. it was a devastating and very difficult decision for me it marks the end of three decades of hard work at an institution that i loved. i accepted responsibility for the events that happen on my watch. my overwhelming sadness is the 400 people who work for me.

in particular, i relied on my to helpers to provide important concerns me. the oversight of this was undermined by two critical thoughts that have come to learn only recently based on the company's public statement. and significantly understated the real risks reported to me. secondly, some members did their best in good faith. they minimize, supported, and projected losses and related important information.

throughout these events, i did what i tried to do during my career. i faced the difficult issues with dignity and integrity. i had many months to think about what happened. i don't have all the answers. i can tell you that i always try to do my best. i tried to approach these issues presented to me thoroughly and transparently. clearly, mistakes were made. the fact these mistakes happen on my watch has been the most disappointing part of my personal career. i think you for the opportunity to appear today, and i will be happy to answer any questions you may have. >> thank you very much, ms. ina drew. now we will call on mr. reagan. >> good morning.

members of the subcommittee, chairman, and ranking member. my name is ashley bacon. i have been a jpmorgan for 20 years and have spent six years in the firm's risk management function. i appreciate the opportunity to come before you today as part of your inquiry into the credit portfolio and tell you what i have observed to independently assess the cia trade. let me express the firm's commitment of the importance of risk management along with other individuals. we led a team of professionals conducting a detailed assessment of the portfolio. the purpose of that review is to understand that the system

needed a chart for a course forward. we reviewed and reported back to senior management released on a daily basis. after initial reports, we were asked to take over responsibility for the day-to-day management of the synthetic credit portfolios. the firm also requested that my colleague lead a task force to investigate. i will simply discuss a few key steps and risk management within the cio.

additionally, the firm insured risks for independence and the appropriateness of staff. he reports to me. his compensation and career advancement include performance is appropriate and the risks calculated. the committee meets on a weekly basis and includes other members of senior management from within and outside of the cio. it has been reconstituted as the cio treasury inc. treasury to reflect the broader responsibility and increased participation. third, the cio implemented a broad set of risk parameters. what remained of this was

transferred to the firm's investment bank, where it is subject to detailed analysis. jpmorgan has conducted a comprehensive self-assessment of the risk organization. as a result, we are resulting a series of improvements that are within our lines of business in addition to working to improve models of development. the firm is reaffirming risk limits in the lines of business. and we have introduced additional granularity and will continue to do so as appropriate. we have strengthened our processes to provide for a more rapid escalation and more effective review. to establish and improve the operations and enhance the reporting for the board of

directors. an organization must look for ways to improve. the steps i have described reflect a fundamental belief in how a risk profile should be seen with a challenge and the rights where information is available. thank you for the opportunity to appear before you today. >> good morning, chairman, senator mccain, members of the subcommittee. i am here today to help explain some of the facts surrounding the events in question. to the best of my knowledge and recollection. >> thank you very much. let me start with you, ina drew.

if we look at exhibit number 81, which is in front of you, we probably have more than a probably have more than a round or two with his first panel. we will switch after 12 minutes. >> on march 20, 2012, about the cio, on page 20 provide a chart listing nine investment portfolios at the cio. and you indicated whether they had longer or shorter investment horizons. where is it all not sure? >> it is on the right side on the bottom.

where it is noted that the portfolio is reducing credit security. >> all right. so it is under -- it is that the shorter and of the investment horizon. is that correct? >> at the time, that is correct. >> i'm not asking you whether it was being reduced at that time, but whether it was at the shorter end of the investment. >> that is correct. >> so in 2012, the credit portfolio is being actively traded. some were buying and selling on behalf of the portfolio. is that correct? >> yes. >> the portfolio grew from 51 to

$157 billion. was it corrected by the time of your presentation by the board of directors on march 2, 2012, most of it would have been purchased during the first quarter. >> that is correct. >> so these were not investments that were made on a long-term basis? >> senator -- >> if it is a shorter investment horizon, is that not correct? >> that is correct. however, the position in the book is a long-term position that had been held for many years. >> when this portfolio grew, i

take it that most of those positions have been purchased during that quarter. is that correct? >> that is correct. >> when they were lost at $6.2 billion, it took place over 2012. that affected the balance sheet of jpmorgan in its earnings. is that correct? even though the trades were made in london? >> yes, that is correct. >> to the london traders have to get approval of the risk managers like you to put on position remap. >> let me ask mr. weiland that question. did they get the approval to put on these positions? >> not for individual traits for

the traders in london worked with another set of delegator's. >> so they did not get approval from you for the positions they were putting on? >> not individual traits. as long as they were working. >> is that what you call positions? >> yes, -- >> they didn't get your approval, is that correct? >> not one by one. >> on january 30, 2012, the cio with the occ other standard quarterly meeting to discuss the cio is upcoming plan. there was a meeting with the occ. take a look, if you would, at exhibit at be.

>> it is the occ summary of the january 30 meeting. the interviewer who attended the meeting and wrote the summary, and mr. welner, who attended, they confirmed to the subcommittee that the notes were accurate. about two thirds down the page, exhibit 58. the occ reports that it was told by jpmorgan that the book primarily of the synthetic portfolio. it is decreasing in size in 2012 and is expected that it will decrease from 70 million to

$40 million. so you see that. two thirds down the page. it says this is decreasing in size. dcr? >> okay. >> in fact it was rapidly increasing in size in the first quarter of 2012. is that correct? >> you can see on the chart over here. [talking over each other] >> is that correct? >> yes. >> this meeting took place january 31. the occ was told that the book was decreasing in size. in fact it was increasing in size. also in the first quarter of 2012, standard data was stopped being sent.

for 14 months comment from january until april, the cio did not send for the occ the executive management report with its financial data. and it did not send to the occ the control group reports those reports were not sent during those months. is that true? >> i do not know. i have no part of this to any regulators. certainly, if i would have known, i would've reported it as it would've been the right thing to do. >> you don't know? >> i do not. >> who is in charge of getting those reports to the occ? >> i don't know. >> who is in charge of getting those reports to the occ? >> it is my understanding that

risk and finance. >> can you give us the names of people? >> i don't have a specific person, but within the risk and finance organizations, well, any and all contact was made with the occ. >> who is in charge of sending them? >> i do not know. i do not know the people that were responsible. the individual people. my understanding is that is normally part of the finance function. >> okay. maybe we can find out later from our next witnesses. take a look at exhibit 47, if you would.

>> okay to . >> here's an e-mail dated march march 2, 2012. it was sent to you by one of the quantitative panelists. it talks about the cio results. and the cim stands for comprehensive risk management. in worst case scenario, a judge is how much can be lost in a year. it was about to become a requirement in anticipation of that. this e-mail was written, jpmorgan had already begun starting to calculate the comprehensive risk measurement. that was in part because the occ was also doing so.

and it required banks to calculate their requirements. in other words, how much money comes from shareholders. on march 2, you receive the e-mail. notifying you at the bottom of the first page but the numbers have increased significantly. you responded that these results, as i understand them, suggest that there are scenarios that could lose $6 billion in one year. an e-mail was forwarded to the head of credit trading in london. you call the result. you wrote that we have some cim numbers and they look like

garbage as far as i can tell. two to three times what we saw before. you and your colleagues, you guys complain about the analysis with the head of quantitative research, a man whose full name is noted. the risk of losing it -- here's what he wrote on page 49. based on our models, we believe the 3 billion increase which was a reference by a 33 billion-dollar increase of shore protection to confirm this

33 billion. >> the sap portfolio. it wasn't decreasing as the cio told the occ on january 30. is that correct? do you agree with that? >> yes, that is correct. >> was the portfolio also increasing? >> yes. >> the quantitative experts said that the conference of risk measurements shot up to $6 billion. >> do you now believe the

portfolio actually did lose $6.2 billion in the year. >> you think that was a coincidence that there was a 6 billion-dollar loss predicted in a year and a worst-case scenario? >> it is hard to believe. >> mr. chairman, if it's okay, senator johnson. >> is your chairman, mr. bacon, as soon as you were brought in,

assessing what has happened here, i would like to ask you a question. did the management of jpmorgan -- was it a pervasive attitude that jpmorgan was too big to fail and they could drive up the risk portfolio? >> i do not believe that played a part. i think this was such a set of egregious mistakes that is much regretted. >> do you believe that the dodd-frank act either ended too big to fail or had any chance of ending too big to fail? >> yes, i think the work that is going on -- i think it is to the benefit of jpmorgan if we do end up in a place. >> do you believe it is already ended too big to fail? >> i think it has potential. i don't know whether it has

ended. i believe the work is ongoing. but i'm i am not the individual working on that process. >> do you have a fair amount of contact with bank regulators in your position? >> a fair amount. >> do you believe bank regulators up to the task of understanding the complexity of these transactions and understanding the limits? >> the answer is generally yes. but when something like this occurs, and we do not understand it ourselves, i think it makes it incredibly difficult for them to understand the details in the context. >> okay. my time is short, but i'd like to sum up by saying that i think the fact that we are having this hearing, we are still concerned about the activities that could pose a systemic risk and danger. the goal of congress should be to get the american taxpayer off the hook for what happened. i think the only people that

should worry or care at all whether jpmorgan last five or $6 billion would be jpmorgan management and jpmorgan shareholders and not members of congress. i hope these types of hearings, we can get to the bottom of it we can actually end too big to fail. thank you for your indulgence. >> thank you. >> thank you, mr. chairman. sir, you said you didn't know who was responsible for the reports that were supposed to be made in the occ? >> that is correct. >> do you know the office? that was responsible for these reports? >> as i said, my understanding was to the financial function. it is part of the regulators. >> but you do not know who that

individual is? >> that is correct. >> but you don't know an individual who should've been responsible? >> we don't know. >> performance, we knew that we were sloppy, we knew we were stupid about it. we know that there was bad judgment. do you share the assessment of this? >> now that i understand all that transpired during the time. including deception and control

issues. yes, i do agree. >> you have maintained that it existed to hedge risk. but in a subcommittee interview, you can only provide a guesstimate when asked exactly what the portfolio was designed to hedge. do you stand by that statement as well? >> certainly that wasn't the best were that i could have chosen. i would say that $2.5 trillion balance sheet, macro hedges, which are fluid as the balance sheet changes, it does change. that is why responses show that things do go up and down. it's part of the process. a poor choice of words. but i would not know the exact amount of each individual hedge. all i know is that any hedges were eliminated to the balance sheet and its components.

>> sir, you indicated with a subcommittee that it was not your job to enforce risk limits, even though you beware the senior risk officer. whose job was it, then, to enforce this? >> i saw the way it was written in the report. it is not my recollection that i said those words. certainly it was my job to enforce this. in cooperation with the other senior management of the business. i did not make any unilateral decisions. but it is certainly part of my job. >> as early as march 30, you said that the cio needed help

with a part of this and they were in crisis mode. but they said they were surprised about the lawsuits. doesn't this e-mail indicate otherwise and suggest that they should have acted sooner? >> i recall the e-mail that you are referring to. i stand by this. they lost faith in the ability to manage this number. the modeling techniques and the additional things and so on. they had asked for expertise to be inserted in the brief and i arranged for that to happen. >> in january of 2012, the chief financial officer assured the

occ that you plan on reducing the portfolio's risk weighted assets from 70 billion to 40 billion. yet it tripled in size instead. can you tell us what happened there? >> are you sure -- you assure the occ do you plan on reducing the portfolio. get in actuality it tripled in size. how does that happen? >> was the occ misled? >> please allow me to explain. the plan was to reduce it over the course of 2012. we have asked for and received permission to have a slightly

higher capital number for the first quarter before embarking on a rapid reduction in the second quarter forward. things went terribly wrong, as we all know. very large purchases that were made at the end of march were not brought to my attention on time. >> was your responsibility to fully disclose the true nature of this increasing size to the occ? did you? >> wasn't my responsibility? it was not my responsibility to discuss information directly with the occ. >> sir, you were warned early 2012. risk measures predicted massive losses. after the bank lost money, you stand by your statement that the

risk measures work garbage and not sensible? >> you are referring to the different risk measures. the results of the testing, which i called garbage, and that is not an appropriate word, and not typical of my response, which i take very seriously, that was part of a process that we were working on to develop a model for the new regulatory requirements. that was her very first reaction to a number that was two to three times what we had seen previously. after some changes that we had made, the first reaction was that it doesn't look right. as we discussed a little earlier, it turned out to be right with respect to the second

reference that you made. in fact, the methodology we are using is not appropriate. decision was made to make a change. the change was not made. so there was a mistake they are. there was a missed opportunity there to have interpreted that as a sign of something that we didn't see at the time. >> in a later e-mail you said that we will be replaced by something more sensible.

>> mr. bacon, there are risk limits. were those breaches are ignored? >> no, they were not ignored. specifically the one that you are referring to, it was addressed out of firmwide level. it was not ignored. it caused action and escalation. it was a situation where we relied upon the explanation it turned out to be wrong about the new implementation that was agreed upon by the risk management. >> let me tell you what is hard to explain to my constituents

when their tax dollars are ensuring their deposits. how can we possibly balloon up to a 6 billion-dollar loss and basically -- it was not only ignoring the facts, but sort of endorsing the behavior. it seemed that the traders seem to have more responsibility and authority than the higher of executives. i have to go to a town hall meeting in arizona. can you tell me what i am supposed to tell my constituents ?

tell me, mr. bacon, which i say? >> first of all, i think that we should be clear that this whole thing is regrettable and un- accessible, we believe that it isolates us and it is on us now to demonstrate how this can happen in other places. and how we can make the entire firm safer place for two obvious ones are treating oversight and management oversight in london.

failed completely. in the second line of defense. risk early and finance after that. it also failed with the granulation in limits and escalation and the pushback of the risk committees. he would actually have been easy to catch this in many ways. very regrettably, it did not happen it needs to be done. i think the process is something that needs to be demonstrated. >> it was your job to enforce

risk limits with senior management, i believe. is that correct? >> that is correct. >> risk limits may be complicated. but the bottom line is that they sound alarms but it looks like an investment portfolio is looking like productive limits that could exceed the dollar limit that was set up ahead of time. now, if you take a look at the exhibit in your book, this chart is also up in front of you. the risk limit breaches. the ground limit was reached. the new model was put in place. we have a little conversation about that, we will have a lot more later on. but what occurred even before this breach was the so-called

cso-1 breach. what is that stand for? if the value of number one. >> all right. the credit spread of one basis point is cso-1. >> correct. >> look at exhibit 39, if you would please. it is page after page after page

of breaches. by the way, most of them are not garbage. if you look at this, just at the breaches involving mass, in the last quarter of 2011 and 2012, you can see a huge jump. six breaches in this synthetic credit portfolio to over 170 breaches. the number of breaches jumped from six to 170. in april of 2012, there were 160

breaches. almost as many in the one month of april as the previous months combined. those three months had 16170 preachers compared to the previous quarter. would you agree that that is a worry some pattern? a large jump in that would be a worrisome problem. but by april, the action had already occurred. of breeches and risk metrics, the markets move.

>> what date in april was that? to . >> more than one risk limit was breached at a time. does that send a stronger signal? >> it depends on the situation. >> is this a low risk investment portfolio? >> no, it was not.

>> there are a couple of different circumstances. as i have art he said, we missed an opportunity there to understand some changes early. given that the plan was to change the limits, it we continue to breach it because we were working on the changes. there were active discussions on how to deal with it.

in the portfolio drafts by that specified amount -- this synthetic credit portfolio first breached limit on generation x and kept on doing so for more than three months.

it is an access of this percentage for 71 days. it means the synthetic credit portfolio is reaching the risk limit. >> it was over 10 times the women. in that exhibit, 39 that we discussed earlier, it indicated that on april 19 that the limit was $5 million and the projected process, the credit spreads widen $59 million. is that correct? >> yes. >> you responded by saying that

we are all working on a new set of limits for synthetic credit and the current ceo will be replaced by something more sensible and granule. so you were ignoring this limit for 71 days because the cso limit was not sensible? >> if the risk limit was outdated, why did it take that long to update? >> i do not know. >> when the occ requires that this be updated every year. why was this not updated? to i do not know. >> even though the policy of the bank was supposed to be updated every year. there it sits for three years.

you have it saying that 71 days go by looking like that. how do you explain a? >> we were in the midst of revaluation at that time. >> three years? >> no, we begun in the summer of 2011. but at the time there were a lot of individuals in the market. and we were very focused on getting regulatory models up to speed and adjusting the business to deal with those. those things get priority. the change is not limit.

>> it was outdated anyway. despite the occ regulation. are you aware of the breach? >> just. >> why did you not think that? >> my understanding was that it was in the process of being reviewed. and i was told by risk that it was not replaced with the risk group inside and outside.

>> it was said that we had a global credit access, as i understand it, a limit. that is another name for the cso limit. it was set up at the initiation of the credit. unfortunately we have done upset for most of the year said you had no memory of this. >> i probably misunderstood. that is why i followed it with

it needs to be retracted all the other limits with the review but i was assured was ongoing and had actually been started and was making some progress with. >> did you know that these limits were supposed to be reviewed every year? >> just. >> were you aware of the fact that it wasn't? that it hadn't been reviewed every year? >> i do not recall. >> were you aware that it was a thousand% over the limit? >> no, i was not. >> senator mccain? >> that's all for my questions. >> thank you. >> there is a second risk limit on the chart.

it sets a limit on how much money is at risk and being lost over the course of the day. >> if we can establish this, use like it was breached on limits for several days starting on january 16 and then again for four days starting on january 24. ceo jamie dimon personally approved a temporary increase. until there is a new approval, which is around the risk limit. it was activated on january 27, the result was an overnight drop

that was activated and 50% in the results come in the breach ended with without having to get rid of a single risk investment. with the model, it is $132 million. that is how much money is at risk. even though the portfolio had the same risky credit derivatives, the value of risk. ma'am, how did you know the new model would be more accurate?

>> my understanding is it had come through quite a few iterations before was revised. >> you saw the model review group. when they approved it, that the cio have to automate the data entry.

>> i was unaware that. >> do you know whether or not -- you said there was no back testing that was done. is that correct? >> i do not know. >> okay, take a look at the exhibit.

[inaudible conversations] [inaudible conversations] >> this is what the review group looked at. in this case, they required -- this is what the review said, excuse me, about what happened. the model review group required only limited back testing. and it insufficiently analyzed the results that were cemented. so you have this new bar that is

in there. cut in half the bar of 70 billion. it's no longer have the breach. when it was approved, it was approved with the requirement that there would be only limited testing instead of back testing it to see whether it was worth it. and it insufficiently analyzed the results that were submitted. so it is full of operational errors that the bank knew about. then supply the funds despite multiple requests to deal with the operational errors. >> do you think that, sir, what do you think of the model that drafts this by 60% overnight? what you think about that? >> i think it is something which

would require a bigger explanation. >> like back testing? >> yes. >> it deserves the back testing. >> i think that it was limited. >> what it did provide, the insufficient data, it wasn't even analyzed. is that correct? >> that is absolutely not the way to do it. >> but it was not even analyzed. >> that is what the report said. >> i'm sorry, sir. i must have misread. >> our model depends on analyzing this new trading data. instead of constructing an automated database that automatically sees the data. the phd was stuck with having to manually enter this data every night into spreadsheets, which

had calculations and formula errors. in other words, the new value risk model the 350 million-dollar -- excuse me, billion-dollar portfolio included this. it was being run manually using error-prone spreadsheets with operational flaws. ..

i'm sorry, why do they approve this outside no if there are problems and allow it to operate in such a shoddy fashion whacks >> it's very disappointing. i have no idea. the risk modeling group is independent staffed by well-trained and educated phd's to run the models names certainly very disappointed that he was not reviewed properly and delivered to be in poor form. >> it bothers me come and go take a look, not that the multiple risk limits were breached in so frequently, nobody was told to start trading because of the risk then it

reached. i mean, someone should have investigated risky trading activities that trigger doggies. is not the point that someone would investigate breaches? >> yes, senator. >> another thing that bothers me is the biggest reaction has been to criticize older than it is inadequate and not a bunch of new ones. they used to be five big risks. now it's gone to 230 risk limits for the portfolio. this is the point. it wasn't this and other credit portfolio had too few risk limits. this risk management personnel didn't enforce the ones they had. i don't see a pattern in under 225 risk limits on sunday. do you want to comment on that? >> yes. i very much agree with you that

the first failure is not to escalate and remediate when what she contemplates the use of names. so it i do agree with that. when is alteration to policies and procedures whereby automatically echo saw the way to the race committee containing mr. diamond, r. c. echo, myself, everybody. that is now automated. i think on the questions of whether it's necessary to have more than that of the this particular egregious mistake was caught by a small number of limit. there's other mistakes you could make it a nod of the cod by a small set, which is why we want to be safer than that. >> we are going to take -- senator mccain. we're going to take a five-minute rake and then widen our panel. give us enough or 292 use the

restrooms for anyone who needs to do that. it's going to be very, very brief. we'll be back in five minutes. [inaudible conversations] >> we will be back in order and will now add to our panel had called two additional witnesses to the hearing. michael cavanaugh, head of jpmorgan chase task force reviewing cio losses in the coach he thinks it could have officer of the corporate and investment bank at jpmorgan chase and douglas baustein in the current vice-chairman and former chief financial safer in

2010 to 2012. i appreciate you looking this morning. pursuant to the rules of the subcommittee, all witnesses who testified before us look required to be sworn. i ask each of you rise and raise your right hand. these are the testimony about to get to the subcommittee is the whole truth, nothing but the truth to help you god? >> were you here knowing about since done? if you have opening statements, now you do. put your mike on, please. >> chairman levin, ranking member mccain and members of the subcommittee, my name is michael cavanaugh and i'm the co-ceo the corporate and investment into jpmorgan.

as you know, i reselling them led a task force to conduct a review of the circumstance is surrounding the 2012 losses in jpmorgan chase investment not us. i appreciate the opportunity today to discuss the task force work, to describe what we found oscilloscopes jpmorgan is taken in response. some of what we found was frankly very disappointing and does not reflect our institution at its best. that said, we've addressed the issues head-on and are determined to become a better company because of this experience. we fully cooperated with the subcommittee during the course of its inquiry and is noted in a written statement respect to key role the subcommittee has played in highlighting the importance of effective risk management and oversight hibernation's financial and the two shows. we appreciate courtesies extended by staff.

as you know, earlier this year, task force issued a report, which was the culmination of an extensive review paperwork included interviews of current and former jpmorgan employees in the examinations of millions of documents and tens of thousands of audio files. the work was overseen by an independent review committee of order direct or spirit within cooperate with ongoing inquiries by governmental authorities here in the united kingdom. because their findings are public and set forth in favorite testimony, not going to discuss them in detail now. instead i think to briefly summarize key conclusions and steps are taken to address problems we found. in short, the losses were the result of a number of acts and omissions, some involving personnel and some involving governments. those responsible include to

varying degrees the flawed traits, managers who fail to properly vet the strategy and ensure that it was sound. risk managers who fail to serve as a robust check, treating it to be in senior management to fail to ensure cio was subject to the same rigorous oversight as other parts of the firm. in light of what we found, the firm has taken wide ranging remedial action both within cio to prevent him similar to occurring in the future. these are described in detail in the task force report, but i'd like to highlight some of the more significant steps are taken. first, the firm has terminated the employment or accepted the resignations of the responsible personnel and pursue contacts

compensation. second coming jpmorgan has a new leadership team that is refocused on its basic mandate. third, the firm is increased resources for the key risk and finance control function with a cio. forthcoming cio has implemented new or restructured limits covering a broad and granular set risk parameters. fifth, the firm has adopted a variety of measures to improve its oversight and control of cio. the firm have not been limited to cio. the firm has among other things connected a comprehensive self-assessment of its entire risk organization as a result of implementing a series of improved and across the entire firm. are there certain to improve, we can and will do so. with respect to trading itself, we've learned many hard lessons.

in particular, any future portfolio hedging will be subject to monitoring requirements documentation linking the hedge to the risk is designed to offset. in conclusion i want to assure you the experience has caused substantial and healthy introspection in senior management level of our firm and recognition of the need for continued improvement. thank you and i look forward to taking your questions. >> mr. cavanaugh, mr. baustein. >> thank you, ranking number 11, members of the sub committee. i name is the baustein and i stared at jpmorgan chase. from 2010 to 2012 is served as executive vice president and chief financial officer. thank you for the opportunity to participate in today's hearing.

mr. cavanaugh has made a statement on behalf of the firm. i look forward to answering questions today. >> thank you very much. during our investigation we came across examples of giving the examiners are time. and 2010 according to an occ e-mail of 2012 when the occ concluded an exam and told you the cio needed to do a better job documenting risk and investment decisions, you sternly told the occ that they be overly intrusive and there was little need for more document tatian since jamie diamond was aware of the investment activity. the record of your reaction is

671 amounts of may 2012 e-mail to mr. waterhouse, the occ examiner in charge recounted the 2010 incident. the first paragraph this is what he wrote, fyi we did an examination and have a file that plans to. we have some concerns about overall governance and transparency of the committees. he received pushback from the bank regarding our comments. in fact, she called examiner fred krum lesh in london and certainly discuss for 45 minutes. basically she said investment decisions are made with a full understanding of executive management including jamie

diamond. she says everyone knows what's going on for reports. according to this e-mail, he said the investment decisions were made with the full understanding of the executive management. is that true? >> yes, it's sure. >> according to occ examiner in charge in january or february of 2012, the banks stop sending the daily prophet data to the occ. just plain stop sending those documents. no notice, no explanation. no profit or loss of data, one of the nations largest is the investment bank. according to mr. waterhouse, the occ had to escalate the issue to you, mr. baustein, chief

financial officer to reverse the decision, which he did. during a meeting between you, mr. diamond and mr. waterhouse cup could be claimed clearer that the data cut off. that correct? >> yes. >> to the bank stop sending the populace data for the investment bank for a period of time? was to re-colonel bob? >> senator, it is approximately two weeks. >> did you restore that data quite >> yes, sir, i did. >> to mr. diamond see why he had ordered the data stopped? >> prior to stopping the data, a number of regulators had reaches in some information be shared with them. there have been mistaken losses of information and so we wanted to ensure prior to restarting

the data that we had adequate controls in place to ensure that data got to the regulators sent only to the regulators. >> did you notify them that was your reason? >> i did speak during the course of that period of time. >> he told them that was the reason the information was not coming to them? to january, february time. >> when you're not delivering data in the ordered it restored, apparently there was something he did it in any event you order the data restored. did you tell the occ why your site did not data? i believe the time. this earlier, but i do recall in that period of time having conversation to explain why we had chinese data. >> what did you talk to quick >> i can't recall it was mr. waterhouse for mr. kamlesh.

>> which he gave us the explanation for cutting data office the same he gave to them. is that what you're saying? >> they expressed that concern and told them i would turn the data type. >> was mr. diamond unhappy with the data was turned back? >> can't recall specifics of the reaction, sir. >> you don't recall there is happiness there when it was restored? despite disorder? >> .recall specifics of the interaction. >> how about generalities >> as they set, i don't recollect specifics of the meeting. >> now sometimes the bank gave wrong information to the occ. he showed already today the january 30 quarterly meeting, cio said he was reducing the

credit portfolio when in effect it was then. here's some more examples of wrong information from jpmorgan and nice, after the media exposed the wheel trades and started asking for them or us. the synthetic credit portfolio as a merchant market portfolio which meets again the value is recorded internally everyday. on april 16 come again after the media storm hit, the bank that had provided its first presentation on the synthetic credit portfolio. mr., your president for the briefing and not that brief in the bank told the occ the first-quarter losses were $580 million that's an exhibit 60. actually the losses at the end of the first quarter on march

march 31st has been reported inside the bank at $719 million. if you look at exhibit one g -- this is a list provided i believe it may above the internal profit and loss report. and if you the air, you'll see a march 13 with $718 million according to the bank's internal reports. what was reported to the occ was $580 million. not only that, but on the friday

before the monday april 16th public report that you were involved in, mr. baustein, the bank met with the occ and losses had more than doubled to $1.2 billion. before the 16 conference call, two things happened here. one is that the report of the first-quarter losses for 580 million were wrong. according to the bank's own records who is 718 really dollars. the friday before april 16, the losses had more than doubled by $1.2 million. so first, why did you tell the

occ the first-quarter losses for $580 million when the losses are $7199? >> the number i believe is accurate, finance added is that i was as close to quarter and reserves on top of mark to market losses. the correct number given to the occ. >> i think this is separate from the research. the losses reported on this report. >> a number that was given to me calculated by finance and that's the number of worded. >> you don't know whether that number was accurate.

>> that was agreed with the last statement given to me the day i met with the regulators and reviewed by chief financial officer. i knew that number to be the correct number. >> when you map the occ on april 16, that was the number you gave them? >> i'm not sure which -- >> i want you to look at the debate. >> has come in looking at the exhibit. first quarter is march 31st. $719 million. and then take a look at april 13. d.c. had number? $1.2 billion. d.c. that? said the number you gave money to six team was 580 million.

your own report shows 1.2. your internal report shows $1.2 billion. the friday before you met with the sec your report showed $1.2 billion loss, but he told the sec velocity for 580. why not give them colossus at april 3rd team, the friday before you met with them? >> the occ had profit and loss taylor report. the number i gave -- >> say that again. >> the best of my knowledge, the occ is given daily reported thursday at dvds. >> sievers pain january, february, march april is your daily profit and loss quick >> is my understanding.

>> for the synthetic credit portfolio. >> with the activities of which the credit portfolio was included. >> was that identify a? was that identified separately quiets with the scp identified separately on those reports? >> that i do not know. >> i think you're inaccurate about this, but we will find out. >> thank you, mr. chairman. mr. baustein, let me be clear for the record by regulation reports are required to go to the occ. is that correct? >> i believe so, sir. >> and yet, mr. diamond made the

decision for two weeks at a very critical time not to send report, is that correct? >> that is correct based on a concern about the confidentiality of this report. >> with normal citizen, normal enterprises are required to decent thing and you don't want to do it, didn't you seek out and is to avoid it. do we live in a world that government regulations of our business and lives we just decide well, because were concerned about some and were not going to comply with regulations. is that how jpmorgan works? >> now, sir, it does not. >> did it work in case? >> i am not aware that was a

report required to be provided to the regulators. we also were concerned about the loss of confidential information that we wanted to ensure we had seizures in place to avoid that going forward. >> i guess we can find out whether reports are required or not although i believe they are unable haversack chat. is there any other time when an executive decision was made? we won't send the supporters to occ. >> not that i'm aware of, sir. >> it seems to me remarkable that if you are required make reports regularly to regulators on a routine basis and this is a time, the timing is interesting

of this, decides not to give a report. i'm not sure there's many organizations and corporations in america that could get away with such a thing and frankly it's kind of the testimony to the lack of action on the part of the regulators if they expected those reports. i would like to go back to this female from scott waterhouse to mike brosnan. because we didn't examination and we had concerns about overall government and transparency of the dvds. we received a lot of pushback from the bank regarding our comments. in fact, i not called and sternly discussed conclusions for 45 minutes.

basically she said investment decisions are made with the understanding of executive management, including jamie dining. defendant video? those decisions you are a full understanding of the investment made. >> senator, i'm not familiar with what specifically i know was referring to. >> let me try and help you out. she was referring to concerns about overall government and transparency of it in the spirit >> i say we are never fully trained parent and i would have supported that transparency as the specific investment decisions are certainly aware aware of this and that accredit

project. >> east at april 13 called the firm was very cold to go with the positions of the scp. as mr. cavanagh pointed out this statement was wrong of course. when the did you than your statement false in nature take efforts to correct the record? >> senator, on the benefit of having say, the bank and i were both misinformed and incorrect when i said we were very comfortable. based on information available to me at the time for the whole range of sources from the cio, risk, to keep true. when i discovered behavior patterns inconsistent subsequent to the 13 in the portfolio's performance, myself and mr. diamond, john hogan began a much deeper inquiry.

>> decides to traders who mismarked the book, who should be held accountable for his anyone been held accountable aside from the traitorous for breaching jpmorgan's own internal disk and adjusting risk models. >> pathetic question for me, senator? >> yeah, i'm sorry. besides the traders who mismarked the boat, who should be accountable for breaching jpmorgan's own internal risk limit and adjusting risk models? >> senator, i concur with the task force report that there were a number of mistakes made in the cio, the risk organization, which iran had deeply regret those mistakes. >> when you're held accountable, at